Federal Reserve chairman Jerome Powell appeared to regret not having cut interest rates in July. "If we had gotten the July report before the meeting," which showed a significant rise in unemployment, "would we have cut? We might well have." Layoffs weren't much of a problem but the number of job openings had shrunk.
The Fed's delay, said market analysts, likely explained its interest-rate reduction of 50 basis points yesterday, or half a percentage, rather than one-quarter. Powell announced two more cuts by year's end, four cuts next year and another two cuts the year after that, anticipating a 2% rate of inflation by the time 2025 closes out.
On to politics. The cuts are a good development for Kamala Harris, as they're likely to help homebuyers with lower mortgage rates and consumers through less painful interest on credit cards. But the cuts are a sinister development in Trump's paranoid brain, although happily they're also cause to bitch and moan about "all the political stuff" — this time, Powell's diabolical strategy of helping Harris.
And bitch and moan Trump did at a Tuesday night Flint, Michigan rally. Not a political or financial soul believes the cuts were anything but overdue. But to Trump they were another sign of the deep state always aiming to destroy him, though in this case the deep stater is a perfectly visible, surface-state actor. No matter, the rate reductions were all about victimizing poor Donald.
Strike that. They weren't all about his victimization. Some of the adjustment's reasoning stemmed from Harris' victimization of the American people throughout the last four years, which he yapped out like a chihuahua-clutching Trumper spying a Haitian. He'd have us believe the vice president has reigned supreme in all things economic as Joe sat in a corner. (Same on foreign policy.) Yes, said Trump, the Fed had to cut rates because "the economy's not good."
"The U.S. economy is in good shape," said Powell the following day. He added at his press conference that "inflation is coming down" and "the labor market is in a strong place." Naturally he'd have to say that, what with his being a major player in the deep state, one who happens to hold press conferences about his secretive, nefarious doings.
That's the hard, objective, fact-based news. Now for some personal, subjective thoughts.
In these times, economics is all about the Fed and its high-stakes monetary policies. Yesteryear, I an undergrad, an economics professor friend and other friends both students and profs would gather at the college hooch establishment to make ourselves stupid while also wrangling over the comparative merits of Keynesianism and monetarism, among a horde of other disputatious topics.
In those days, the latter was regarded by most reputable economists to be something of a joke, especially since its principal proponent was the former student and later colleague of Friedrich Hayek, Milton Friedman. He scorned Keynesianism and fiercely defended his besieged monetarism. (Eventually he moved on to a "new" classical macroeconomics, which embraced the notion of "rational expectations" — the belief that consumers behave rationally. That was even sillier than monetarism.)
Our gatherings and animated debates — we had a subversive within, a grad-student Friedmanite who took abuse that now shames me — thrived well after the death of political economy, the literate, comprehensible kind of economics. But because it was comprehensible to laypersons, economists began feeling professionally insecure. So they killed it and all interest on my part in the discipline as a serious academic pursuit by converting economics to econometrics, whose evil core is hideousness like this:
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Good grief. John Stuart Mill was a brilliant classical economist, but never would he have tolerated foreign-to-outsiders, formulaic impenetrability like that. He preferred that he be understood. John Maynard Keynes, too, from the opposite theoretical side. He used only the slightest math because of his justified conviction that economic currents are irreducible to mathematical formulas.
Where was I? Oh yes. Monetarism bided its time. I suspect its Milton Friedmans knew if they were patient, their Republican politician friends would so expertly bankrupt the country and throttle its finances with oppressively mountainous debt, other politicians would be straitjacketed in their fiscal Keynesian dreams of actually helping people and making America a better place to live.
And like sands through the hourglass, so were the days of our lives. The U.S. slouched its way to being a belly-up, wholesale red-ink nation whose authentic public servants promising this big social program or that are merely imparting their aspirational daydreams. Ain't no money. For this. Or for that. But it sounds nice, and so it sells.
Through likeminded Republicans' brutality of carpet-bombing federal revenue and legislative assaults on Keynesian economics, monetarism became king. Its practitioners do use John Maynard's tool of tax cuts in hard times, but they pollute its legitimate use by cutting taxes in good times as well, which is just plain idiotic.
Yet the idiocy assists in further gutting the government's revenue, always a cheerful event for the GOP. Otherwise, in times of recessionary emergencies presidents are fiscally limited to mailing out piddling $300 "stimulus" checks. Even the mention of reviving a New Deal-like program such as the hugely successful CCC would be laughed out of OMB's office.
Today, all eyes turn to Jay Powell and the Federal Reserve. If Trump's elected, all eyes will turn to the trained and obedient monkey the macroeconomically ignorant president replaced Powell with. That and Trump's tariffs should finish off the U.S. economy as cleanly and slickly as Joey "the Animal" Barboza finished off Edward Charles Deegan in 1965 — when economics was still largely intelligible.
Why is it that anything that helps Americans hurts Trump?
Posted by: Anne J | September 19, 2024 at 09:47 AM